Family-owned businesses can excel at generating economic value by creating broad-based value for all stakeholders (not just shareholders). This includes employees, customers, and society in general.
According to a PWC report: “Many of today’s most successful family businesses are extending the power of their values to benefiting others — not only their businesses and people, but also the communities in which they operate, as well as the projects and philanthropies that fit their personal mission.”
While the family-owned business has its share of challenges, it also maintains some positive qualities that are a match to today’s market, especially in the area of values. In today’s market, individuals are increasingly looking to their job to provide more than just a paycheck; they are looking for the workplace to provide a sense of meaning and purpose that matches their values. Alongside social ventures, family-owned businesses play a significant role in providing this added dimension.
Family-owned businesses tend to have unwritten values that are built-in, not bolted on, and which serve in building culture and behavior that employees can relate to and thrive within. Family business see less turnover — on average a 9 percent turnover vs. 11 percent turnover for non-family businesses. Ultimately, employees who derive meaning from their work are more than three times as likely to stay, report an increase in job satisfaction, and experience increased engagement at work. For the business a commitment to culture and values translates to customer service — take care of your employees and they will take care of your customers.
Two key values reported consistently in family businesses include resilience over performance and community connections. Both have a tie in the creation of wealth, reputation, and employee engagement and retention.
Resilience Over Performance
As opposed to publicly-owned enterprises which have an average CEO tenure of 6 years, family businesses, on average, have the same CEO for 20 years. While sometimes seen as a potential hindrance to innovation in family-owned businesses, it also translates to the businesses being run with a sense of stewardship and of heritage. The sense of stewardship brings management to build closer relations with employees — creating a sense of loyalty and of purpose.
While there are strong exceptions, a significant number of family-owned businesses place employees ahead of growth and shareholders. Many forgo excess returns during good times to increase the chance of survival during the difficult times. Decisions are made with a look to continuity and long-term considerations of the viability of the business, to future-proof the business. Profitability is a means to the end goal of survival in the long-term.
Connections and support of the community provide the family-owned business with benefits outside of economic returns including bolstering reputation. In an E&Y survey, more than half of family businesses engage in community-impact investing, especially as it relates to education. Engaged owners are involved and have a social commitment to the community in which they work and live. For employees, it instills a sense of pride in the business’s contribution to the community and their part in it. This connection to the community increases the life satisfaction of employees and builds resilience.
In the end, while all businesses are guided by values, family-owned businesses have the unique capacity to authentically align with an employee’s desire for meaning in the workplace and create shared value.
article published in the BJNN on April 20, 2018
By Karen Livingston, a business advisor at the Small Business Development Center (SBDC) at Onondaga Community College. Contact her at firstname.lastname@example.org